MeritDirect Drops Temporary Injunction vs. Slater, But Suit Continues

Business-to-business list company MeritDirect filed a document with Connecticut Superior Court in Stamford Sept. 2 to withdraw an application for a temporary injunction against Chad Slater, Integrated Direct Marketing LLC and Direct Media Inc., though it is proceeding with its lawsuit against those parties.

The application for the temporary injunction was submitted Feb. 21 after the announcement by Slater, former MeritDirect senior vice president, that he had opened a new list firm, Integrated Direct Marketing, and that Direct Media would provide back-office support. Also, Direct Media had announced that IDM was a partner in its new database consortium.

According to MeritDirect's initial complaint, the three parties violated MeritDirect's operating agreement, including that Slater could not compete against his former employer for two years. The complaint further alleged that Slater knowingly divulged proprietary information while still employed at MeritDirect.

MeritDirect CEO Ralph Drybrough called the withdrawal a minor step.

"We decided to withdraw only our request for a temporary injunction against the unscrupulous activities of Chad Slater and Direct Media because they have managed up to this point to avoid disclosing the full extent of what they are doing," he said. "We are confident that we will obtain that information, and we will vigorously continue our lawsuit against them for damages and a permanent injunction."

Meanwhile, Slater's attorney for this matter doubted the suit would go anywhere.

"Technically, they still have a case against Chad, but in the absence of them seeking an injunction hearing the case will most likely not be tried to the court until long after the two-year non-compete is past," said Marc L. Zaken of the law firm Edwards and Angell.

Slater and MeritDirect have battled in court for almost a year since Slater was dismissed from his employment at MeritDirect on Oct. 7, 2002, after almost three years with the firm. On Oct. 24, Slater commenced a civil action contending that MeritDirect breached its contract by wrongfully dismissing him, not paying wages due, defaming his character and other allegations.

Though a Connecticut Superior Court judge issued a preliminary ruling in favor of Slater on April 30, a pending and private arbitration process will dictate the outcome of the case. MeritDirect's operating agreement stipulates that disputes be settled in arbitration.

According to the ruling, MeritDirect was unable to prove there was cause for Slater's termination. The court awarded a prejudgment remedy of $1.34 million. Pending the arbitration process, that amount will be held as a lien against MeritDirect.

MeritDirect also has appealed the decision and expects to be back in court regarding that in October.

The arbitration demand, filed with the American Arbitration Association, lists $7 million as the amount sought by Slater in that proceeding. However, arbitration is a private process, and further information was unavailable except that it is scheduled to resume Nov. 10, according to Drybrough.